To the outsider looking in, cryptocurrency and decentralized finance might feel like an impenetrable fortress of slang, fast-paced investment opportunities, and endless financial research. However, investing in applications and currencies on public blockchains isn’t all technical analysis and costly blockchain courses.

Enter the crypto degen, a person who’ll invest in the newest native token or digital asset going viral on Twitter before doing any research. This is in direct conflict with age-old investment strategies that require a ton of leg work before spending a cent. But why do people become degens if they’re likely to lose money?

Keep reading to learn more about degens and why they exist in the crypto community.

What’s A Degen?

If you’re into online gaming, you probably encounter the word “degen” on a daily basis. But if you haven’t, the term degen is short for “degenerate”. 

When used in the crypto and bitcoin community, “degen” refers to individuals who dump their money into experimental ERC-721 tokens and applications without due diligence.

This investing is often likened to gambling within the crypto community because degens usually spend money based on social media platform-based hype. As a result, degens can either make it big or lose all their money within days – making it a high-risk, high-reward investment style.

Why Be A Degen?

If being a degen means you can lose all your money, why do people do it? The answer is actually pretty straightforward: for fun, or because you believe in the project without really understanding it. 

Of course, this goes against all the rules of traditional finance, but it can also be a viable strategy when done in moderation. 

Risk vs Reward: Degens And Regenerative Finance

Investor money supports open-source software and applications on the blockchain, so it takes considerable community collaboration to get a project off the ground. With this in mind, degen investing has given way to a culture of regen finance, which means that niche projects are getting funded from pure passion (and a little bit of memeing). 

That said, it doesn’t always work out. While regenerative finance can be excellent for smaller projects, degen investing is still a risky move. Investors may “pump” a currency by buying big at the floor price, then “dump” once they’re done. This results in the swift rise and fall of a project’s worth within a day (or 35 minutes, in the case of Yam Finance).

Should You Degen?

If you’re asking yourself if you should degen, it’s essential to look at your knowledge of crypto and your financial risk profile. 

Is your understanding of smart contracts and other related blockchain topics still in its infancy? If so, then maybe you’d be better off playing it safe. 

But if you understand crypto and the incredible risk of being a degen, it’s up to you. However, if you decide to pump money into a shitcoin, be prepared to lose it all. After all, decentralized finance is already quite volatile in day-to-day life, and degen investing raises the stakes.

How To Degen Safely

If you’ve considered the risks and decided to be a degen anyway, you might as well be prepared. Here’s how to degen safely and minimize your losses as much as possible:

Designate A Small Portion Of Your Portfolio For Degen Investing

The one thing you should never do as a degen is stake your entire investment portfolio and dump all your base money into a meme project. If you’re serious about crypto investing, we recommend using a maximum of 2-3% of your total fund (or however much you’re willing to lose) to put into degen investing, if at all.

Do (A Little Bit) Of Research

The whole idea behind being a degenerate in crypto is to put your money wherever you want without researching. However, this is a surefire way to lose all your capital. 

Instead, we recommend looking into platforms like CoinGecko to get a quick overview of a project’s financial health. Some exchanges even list a project’s risk level if you want to simplify the process.

Get In Before You FOMO

Because shitcoins and niche projects are a particularly volatile asset class, you’ll need to get in early to make money. For example, if a currency generates significant hype at launch, you can expect prices to soar within the first few weeks and drop soon after. Therefore, we recommend setting a goal amount before selling to minimize overall losses.

Diversify Your Degen-ing ( Slowly)

Once you’re into degen investing, it can be tempting to dump more currency into several projects simultaneously. However, we recommend exploring new shitcoins one at a time. This will secure your gains (or curb your losses) while also providing stability. 

Doing this also ensures you get a “feel” for the degen space, as well as understand what makes people invest and when people start withdrawing.

Degen In Crypto – Final Thoughts

Being a degen is easy: just put money into what makes you happy. However, when playing the crypto game, this mindset can be dangerous and make you lose all your money really fast. 

But while the smartest thing is to keep away from degen investing as a whole, some people enjoy the thrill of risky investments. So, if you’re thinking of going “full degen” with a small slice of your portfolio, make sure to do it safely and prepare yourself for the inevitable emotional toll of losing your hard-earned money.